Project feasibility study: the key to successful implementation of sustainable and socially responsible construction management practice

Project feasibility study: the key to successful implementation of sustainable and socially responsible construction management practice

Journal of Cleaner Production 18 (2010) 254–259 Contents lists available at ScienceDirect Journal of Cleaner Production journal homepage: www.elsevi...

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Journal of Cleaner Production 18 (2010) 254–259

Contents lists available at ScienceDirect

Journal of Cleaner Production journal homepage: www.elsevier.com/locate/jclepro

Project feasibility study: the key to successful implementation of sustainable and socially responsible construction management practice Li-yin Shen a, Vivian W.Y. Tam b, *, Leona Tam c, Ying-bo Ji a a

Department of Building and Real Estate, The Hong Kong Polytechnic University, Kowloon, Hong Kong School of Engineering, University of Western Sydney, Locked Bag 1797, Penrith South DC, NSW 1797, Australia c Department of Marketing, College of Business and Public Administration, Old Dominion University, Norfolk, VA, USA b

a r t i c l e i n f o

a b s t r a c t

Article history: Received 8 February 2009 Received in revised form 15 October 2009 Accepted 17 October 2009 Available online 22 October 2009

This paper introduces a new approach for conducting project feasibility study by embracing the principles of sustainable development. Construction projects, in particular, infrastructures have major influence on the attainment of sustainable development, thus project sustainability needs to be considered. This becomes a pressing issue particularly in those developing countries or regions, such as China where a huge amount of construction works are currently performed and remain to happen in the future. Previous study has addressed little on the relevance of project feasibility study to project sustainability performance. The importance of incorporating sustainable development principles in conducting project feasibility study is not effectively understood by project stakeholders. This paper addresses major challenges of undertaking project feasibility study in line with sustainable construction practice with reference to the Chinese construction industry. A case study approach is the major research method in this study. The research team collected 87 feasibility study reports from various projects. Attributes are used for measuring project performance, including 18 economic performance attributes, nine social performance attributes, and eight environmental performance attributes. Research results show that economic performance is given the most concern in the current practice of project feasibility study, whilst less attention is given to the social and environmental performance. The study reveals the insufficiency of examining the performance of implementing a construction project from the perspective of sustainable development. The results also suggest the need for shifting the traditional approach of project feasibility study to a new approach that embraces the principles of sustainable development. Ó 2009 Elsevier Ltd. All rights reserved.

Keywords: Feasibility study Sustainability performance Sustainable construction project China

1. Introduction Sustainability concerns the interactions, integrations and significant relationships among ecological, social, and economic systems [1,2]. With reference to construction business, sustainability is about achieving a win–win outcome for contributing to the improved environment and the advanced society, and at the same time for gaining competitive advantages and economic benefits for construction companies. Other studies address the importance of corporate social responsibility (CSR) in pursuing sustainable construction [3–5]. By definition, CSR concerns ethical behaviour related to the environment, society, and the economy [1]. When construction companies set up sustainability as company goals, they often set up CSR policies for implementing necessary procedures. CSR is known to take responsibilities towards the environment and acknowledge the social dimension of sustainability which is often overlooked [1]. * Corresponding author. Tel.: þ61 2 4736 0105; fax: þ61 2 4736 0833. E-mail address: [email protected] (V.W.Y. Tam). 0959-6526/$ – see front matter Ó 2009 Elsevier Ltd. All rights reserved. doi:10.1016/j.jclepro.2009.10.014

The promotion of sustainable construction practice is to pursue a balance among economical, social, and environmental performance in implementing construction projects. Sustainable construction practice refers to various methods in the process of implementing construction projects that involve less harm to the environment (i.e. prevention of waste production) [6], increased reuse of waste in the production of construction material (i.e. waste management) [7,8], beneficial to the society, and profitable to the company [9–12]. As sustainability is usually interpreted as environment oriented in the construction industry, striving for sustainability can cause a conflict between long-term environmental benefit and short-term economic operational goals [13,14]. In a complex concept of sustainability, it is typically defined as to meet basic needs of the public and to extend opportunities to satisfy their aspiration for a better life without compromising abilities of future generations to meet their own needs [15]. It promotes the balance of environmental protection, economic development and social development. However, some studies suggested that embracing sustainable principles in the process of implementing construction projects can contribute to profit

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making [9]. It is particularly important to embrace the principle in conducting project feasibility study. Strategies such CSR are suggested to implement sustainable practice [16]. Therefore, project feasibility studies are often conducted beforehand to gain a better understanding [17] for facilitating gaining better sustainability in the process of implementing construction project. [18]. Feasibility study is the first and most important thing before undertaking project design and construction. The effectiveness of the feasibility study will affect directly the success of a project. Project client or the consultant will work out the project feasibility study traditionally by considering financial issues, such as return of investment, demand and supply in the market, risk analysis on the market conditions [19]. It has been appreciated that the project feasibility study is one of the most easily misunderstood aspects in developing a project [20]. It is nevertheless, the most important stage, as mistakes at this stage can permanently handicap project’s performance, even fatally. A proper and effective feasibility study is therefore more than just a set of financial projections, which can become a market-driven strategic plan and a road map for all subsequent decisions. However, promoting the sustainability in any business sector has become increasingly important and at the operational level within businesses. In line with this development, there is a growing concern that social and economic issues have been outweighing environmental issues in the current practice of conducting project feasibility study [21]. Environmental impact assessment is normally conducted on the preliminary design stage of the project if required [22–25]. It is usually appreciated that construction organizations are environmental polluters, and this has been widely echoed in the previous studies [11,14,26–39]. While these findings demonstrated the significant adverse impacts of construction businesses on the environment, they also reflected the tradition of focusing on controlling cost, time and quality but less attention to environmental and social performance in implementing construction projects. The realization of these impacts has led to the growth of studies on solutions for practicing sustainable construction across a project life cycle [34,36,40–42]. However, the effectiveness of sustainable construction methods has been limited in practice. This limitation is partly due to profit-driven culture in the industry where cost, quality and schedule have been the determinants ensuring maximum benefits to the construction business. It is also due to the difficulties of measuring the contribution of a specific construction project to sustainable development in project feasibility stage. Construction activities in those developing countries and regions, such as China, have caused particular concerns such as environmental pollution, resources waste, safety problems, and effects to the public interests [29,42]. It has been reported that these problems present fundamental barriers to implement the principles of sustainable development in developing countries such as China [43–45]. In fact, there is a close association among these problems and the ineffectiveness of the current practice in conducting project feasibility study. Therefore, this paper aims to examine the current practice of conducting project feasibility study, with employing the data collected from the Chinese construction industry [46]. Challenges of the existing practice for the implementation of sustainable construction are highlighted. Recommendations for the successful implementation of the sustainable construction are also discussed from the perspectives of different project participants. 2. Research methodology To provide in-depth discussions and understanding of the surveyed projects, a case study approach is adopted in this study.

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The research team collected 87 feasibility study reports in 2008 and 2009 for various types of projects which are classified into four categories: 29 residential projects (PI), 27 public sector projects (PII), 20 industrial projects (PIII), and 11 commercial projects (PIV). These samples are collected through visiting Construction Departments in Beijing, Shenzhen and Chongqing. The research team has interviewed project managers, construction managers, site foremen, site engineers, site surveyors and frontline workers for a number of selected surveyed projects. The scales of residential projects are between 20,000 and 2,600,000 m2 construction areas. The collection of these practical cases enables the research team to obtain first-hand information on the practice of conducting feasibility study in addressing social, economic and environmental issues. The examination on these cases leads to the understanding on what and how attributes are adopted in these considerations in the current practice. Therefore, analysis can be given on whether these attributes are proper or sufficient for implementing sustainable construction principles. The analysis can reveal the challenges for implementing sustainable construction practice in China by highlighting the areas which have not been given attention. Measures therefore should be taken to improve these weak areas. 3. Results and analysis The existing practice of conducting project feasibility study varies largely among different types of projects. The difference can be found by examining what factors or attributes are considered in the process of feasibility study. These attributes can be broadly divided into three major pillars, namely economic performance attributes, social performance attributes and environmental performance attributes. The attributes used for measuring the three types of project performance are examined in this paper with the reference to the Chinese context. 3.1. Economic performance attributes Economic performance attributes (EPAs) are used for assessing economic performance of construction projects. These attributes are used to reflect market availability, project financing and economic benefit from implementing a construction project. By examining the surveyed feasibility study reports, a list of EPAs have been considered in various reports and shown in Table 1. The application of these attributes in the surveyed projects varies significantly. Table 2 provides statistical summary on the application of various attributes (EPAs) for assessing economic performance in project feasibility studies of the EPAs in the four types of the surveyed projects. It can be seen from Table 2 that about 90% of the surveyed residential projects take into account EPA4 ‘‘market forecast’’; however, only about half of the projects considered EPA14 ‘‘finance risk assessment’’, EPA15 ‘‘return of investment’’ and EPA16 ‘‘net present value’’. It is found that good attention is given on the future market in conducting feasibility study for residential projects; however, lack of risk assessment is induced. In referring to the public sector projects, the feasibility study on about 96% of the surveyed projects implemented EPA3 ‘‘demand and supply analysis’’; however, only 3% of the surveyed projects implemented EPA6 ‘‘market competition’’. The importance is given to the understanding of the market needs in developing public sector projects. However, limited consideration is given to market competition. This reflects the nature of public sector project in particular in China where public projects are administered by government. This situation normally does not happen in the private sector.

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Table 1 Attributes in project feasibility study. Economic performance attributes EPA1: Governmental strategic development policy EPA2: Tax policy EPA3: Demand and supply analysis EPA4: Market forecast EPA5: Project function and size EPA6: Market competition EPA7: Location advantage EPA8: Technology advantage EPA9: Budget estimate Social performance attributes SPA1: Influence to the local social development SPA2: Provision capacity of employment SPA3: Provision capacity of public services SPA4: Provision capacity of public infrastructure facilities SPA5: Provision of the infrastructures for other economic activities

EPA10: Financing channels EPA11: EPA12: EPA13: EPA14: EPA15: EPA16: EPA17: EPA18:

Investment plan Life cycle cost Life cycle profit Finance risk assessment Return of investment (ROI) Net present value (NPV) Pay-back period Internal rate of return (IRR)

SPA6: Safety standards SPA7: Improvement to the public health SPA8: Cultural and heritage conservation SPA9: Development of new settlement and local communities

Environmental performance attributes EnPA5: EnPA1: Eco-environmental sensitivity of the project location EnPA2: Air impacts EnPA6: EnPA7: EnPA3: Water impacts EnPA8: EnPA4: Noise assessment

Waste assessment Environmental friendly design Energy consumption performance Land consumption

Considering industrial type projects, about 90% of the surveyed industrial projects implemented EPA9 ‘‘budget estimate’’ in project feasibility study; however, only 50% of the surveyed projects implemented EPA6 ‘‘market competition’’ and EPA14 ‘‘finance risk assessment’’. It seems that decisions on developing industrial projects commonly consider cost situation by estimating project budgets. However, less attention is given to the provision of competitive service and risk assessment. This can also be explained by similar service and small price ranges offered by the industrial projects. Furthermore, in referring to the commercial projects, about 91% of the surveyed commercial projects implemented EPA5 ‘‘project function and size’’; however, only 18% of the surveyed projects implemented EPA6 ‘‘market competition’’ in the feasibility study reports. Decision making on developing commercial projects have to properly assess the functions and sizes of the project. However, it is interesting to note that not much attention is given to the factor of competition in developing commercial projects. 3.2. Social performance attributes Social performance attributes (SPAs) are used for assessing social performance of construction projects. By examining the surveyed feasibility study reports, a list of SPAs are identified and shown in Table 1. The application of these attributes in the surveyed projects varies significantly. Table 2 provides statistical summary on the application of various attributes for assessing social performance in project feasibility study. It is noted that no social performance attributes are considered in the surveyed residential, industrial and commercial projects. It seems that social responsibilities have not been given due consideration in developing non-public projects in China. This is considered a major reason for causing the huge gap between the rich and the poor in the society. Even for the public sector projects, many social performance elements are not given consideration in many projects. In fact, one of the major aims for the development of public sector projects is to fulfill the social

requirements, which should be addressed in all public projects. However, among the surveyed projects, only about 70% of the public sector projects concerns on the SPA1 ‘‘influence to the local social development’’. It is further noted that some important factor such as ‘safety standard’ has not been properly considered in the practice of project feasibility study. This element is addressed for 0, 11, 0 and 36% of the surveyed residential, public sector, industrial and commercial projects respectively. The lack of consideration on the safety standard is considered as a major reason contributing to the high rate of safety accidents in the Chinese construction industry. 3.3. Environmental performance attributes Environmental performance attributes (EnPAs) are used for assessing environmental performance of construction projects. In fact, a large number of research works have been conducted in this area [11,28,29,32,36,38,43–45,47–53]. By examining the surveyed feasibility study reports, a list of EnPAs are identified and shown in Table 1. The application of these attributes in the surveyed projects varies significantly. Table 2 provides statistical summary on the application of EnPAs in the four types of projects surveyed. The data in Table 2 provide the information about the application of various attributes for assessing environmental performance in project feasibility study. It is found that the majority of the projects did not concern the environmental performance attributes, of which only public sector and industrial projects concern EnPA2 ‘‘air impacts’’, EnPA3 ‘‘water impacts’’, EnPA4 ‘‘noise assessment’’, EnPA5 ‘‘waste assessment’’ and EnPA6 ‘‘environmental friendly design’’. Furthermore, environmental impact assessments required on projects mainly only concern on the four major environmental pollutions, including air, noise, water and waste. In fact, it has been well appreciated in the previous studies that the environment in China has suffered a lot from the implementation of a huge number of construction projects. As implementing construction projects has been a driving force to the economic growth in China over previous two decades, the effects of the construction industry on the degrading environment is huge. One of the major reasons for this is considered as the lack of consideration given to the environmental protection in project feasibility study. Based on the above analysis, it is found that the economical performance attributes are given more concerns than that given to the social and environmental performance attributes in conducting construction project feasibility study. Interesting evidences include that limited concern is given on market competition in assessing the economical performance attribute, limited concern is given to the safety standards in assessing social performance attributes, and eco-environmental sensitivity of the project location and land consumption are given limited concern in assessing the environmental performance attributes. 4. Recommendations To improve the existing practice of construction implementation towards contributing to sustainable development, all the three dimensions, including economical, social and environmental issues, need to be fully concerned in conducting project feasibility studies. In particular, the project feasibility study should allow more focus on the methods for improving project quality, safety performance and environmentally friendly practice for the future practice of the industry. This highlights the urgent need for shifting the traditional approach of project feasibility study to a new approach for embracing the principles of sustainable development. The

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Table 2 Application of attributes in feasibility study. PI – residential; PII – public sector; PIII – industrial; PIV – commercial; R – application rate. Attributes

PI (max: 29)

RI (%)

PII (max: 27)

RII (%)

PIII (max: 20)

RIII (%)

PIV (max: 11)

RIV (%)

EPA1: Governmental strategic development policy EPA2: Tax policy EPA3: Demand and supply analysis EPA4: Market forecast EPA5: Project function and size EPA6: Market competition EPA7: Location advantage EPA8: Technology advantage EPA9: Budget estimate EPA10: Financing channels EPA11: Investment plan EPA12: Life cycle cost EPA13: Life cycle profit EPA14: Finance risk assessment EPA15: Return of investment (ROI) EPA16: Net present value (NPV) EPA17: Pay-back period EPA18: Internal rate of return (IRR) SPA1: Influence to the local social development SPA2: Provision capacity of employment SPA3: Provision capacity of public services SPA4: Provision capacity of public infrastructure facilities SPA5: Provision of the infrastructures for other economic activities SPA6: Safety standards SPA7: Improvement to the public health SPA8: Cultural and heritage conservation SPA9: Development of new settlement and local communities EnPA1: Eco-environmental sensitivity of the project location EnPA2: Air impacts EnPA3: Water impacts EnPA4: Noise assessment EnPA5: Waste assessment EnPA6: Environmental friendly design EnPA7: Energy consumption performance EnPA8: Land consumption

20 23 24 26 25 20 23 19 19 16 20 24 23 15 15 15 16 16 2 3 3 2 2 0 2 0 2 1 4 4 5 0 0 3 0

69 79 83 90 86 69 79 66 66 55 69 83 79 52 52 52 55 55 7 10 10 7 7 0 7 0 7 3 14 14 17 0 0 10 0

9 11 26 4 19 1 20 19 24 18 12 8 3 3 3 9 9 9 19 3 15 14 4 3 3 0 17 7 15 17 19 17 16 4 7

33 41 96 15 71 3 74 70 89 67 44 30 11 11 11 33 33 33 70 11 56 52 15 11 11 0 63 26 56 63 70 63 59 15 26

14 10 17 16 14 10 16 17 18 15 12 16 16 10 14 16 17 17 3 3 1 1 1 0 0 2 7 6 14 12 12 12 14 11 7

70 50 85 80 70 50 80 85 90 75 60 80 80 50 70 80 85 85 15 15 5 5 5 0 0 10 35 30 70 60 60 60 70 55 35

5 8 6 9 10 2 8 7 8 4 7 6 5 4 5 5 5 5 6 5 3 3 2 4 2 4 2 2 2 4 3 5 0 4 2

45 73 55 82 91 18 73 64 73 36 64 55 45 36 45 45 45 45 55 45 27 27 18 36 18 36 18 18 18 36 27 45 0 36 18

following highlights necessary actions required for different levels of project participants to ensure sustainable construction practice be implemented:

4.3. Architects and engineering consultants

Government has an important role to play in promoting sustainability of construction project at the stage of project feasibility study. The government should guide with policies, laws and regulations, and balance the interests among economic, social and environmental stakeholders through awards and punishment. This role should be practiced through various ways including laws and regulations, industrial specifications, administrative examination and approval, tax fine and other means.

Design documents have great influences on the sustainable performance of construction projects. Designers and engineering consultants should be consulted in the feasibility stage for professional advice on various alternatives and their influences to the project sustainability. Designers and engineering consultants should be equipped with the knowledge of sustainable construction principles, and they should have the know-how of practicing these principles in their professional activities, such as the choice of sustainable design plans, choice of environmentally friendly materials, energy efficient designs for services, and sustainable structure design to enable safer and healthier living and working environment.

4.2. Clients

4.4. Contractors and suppliers

Project owners have a key role influencing sustainability performance for construction projects. Problems contributing to poor project sustainability in project life cycle have close relation with owners. If owners consider and require construction project works from a perspective of sustainable development, the real driving force can be gained to achieve better sustainability. In the traditional practice, as presented in the previous sections in this paper, project clients focus on the analysis on project economic performance in project inception and design stages. To improve project sustainability, clients should work closely with other parties, including governmental offices, planning professionals, architects and engineers. Their advice should be incorporated in conducting project feasibility.

In the traditional practice, contractors and suppliers have no or very little involvement in project feasibility study stage. However, it is considered valuable to consult with contractors and suppliers for advice on improving project buildability and gaining better understanding on the influence of alternative construction methods, materials and plants on the project sustainability. As contractors and suppliers are knowledgeable of construction process and characteristics of various building materials and plants, their roles in contributing to better project sustainability are significant. They can provide information and suggestions about the environmental effects of construction activities and various materials and plant, such as waste generation, air and noise pollution, safe uncertainties, energy consumption, water pollution.

4.1. Government

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The incorporation of these information in the project feasibility study will contribute to improve the assessment effectiveness on the project sustainability. 5. Conclusion This paper discussed major challenges of conducting project feasibility study to the sustainable construction practice with reference to Mainland China construction industry. Eighty seven project feasibility study reports under four groups of projects including residential, public sector, industrial and commercial projects were examined. The study on the practice of feasibility study helps understanding the key factors considered in the practical applications. Eighteen economical, nine social and eight environmental performance attributes were explored from the 87 feasibility study reports. Major results from the analysis on these reports included that some attributes are given more commonly used that others, indicating that individual factors are given different level of significance in the practice. The results also indicated that more economic factors are considered than those social and environmental attributes. In facts, some social and environmental factors are given limited or no consideration at all among the surveyed projects, for example, cultural and heritage conservation, safety standards, and environmental friendly design. The study demonstrated that there is a need for shifting the traditional approach of project feasibility study to a new approach for embracing the principles of sustainable development. The structure of using the new approach for a project feasibility study includes 18 economical, nine social, and eight environmental performance attributes. The performance of these attributes should be assessed when conducting project feasibility with embracing the principles of sustainable development. In recommendation, the implementation of this new approach requests for the concerted actions and participation from all project stakeholders, including government, clients, architects, engineering consultants, contractors and suppliers. Acknowledgements This research was funded by the Research Grant provided by the Hong Kong Polytechnic University. References [1] Hutchins MJ, Sutherland JW. An exploration of measures of social sustainability and their application to supply chain decisions. Journal of Cleaner Production 2008;16:1688–98. [2] Tam WYV. Economic comparison of concrete recycling: a case study approach Resources. Conservation and Recycling 2008;52:821–8. [3] Hueting R. Why environmental sustainability can most probably not be attained with growing production. Journal of Cleaner Production, In press (2009). [4] Vachon S, Mao Z. Linking supply chain strength to sustainable development: a country-level analysis. Journal of Cleaner Production 2008;16:1552–60. [5] Tam WYV, Shen LY, Yau RMY. On using a communication-mapping model for environmental management (CMEM) to improve environmental performance in project development processes Building and Environment 2007;42:3093–107. [6] Ruggieri L, Cadena E, Martinez-Blanco J, Gasol CM, Rieradevall J, Gabarrell X, et al. Recovery of organic wastes in the Spanish wine industry. Technical, economic and environmental analyses of the composting process. Journal of Cleaner Production 2009;17:830–8. [7] Asokan P, Osmani M, Price ADF. Assessing the recycling potential of glass fibre reinforced plastic waste in concrete and cement composites. Journal of Cleaner Production 2009;17:821–9. [8] Tam WYV. Comparing the implementation of concrete recycling in the Australian and Japanese construction industries. Journal of Cleaner Production 2009;17:688–702. [9] Tseng ML, Yuan-Hsu L, Chiu ASF. Fuzzy AHP based study of cleaner production implementation in Taiwan PWB manufacturer. Journal of Cleaner Production 2009;17:1249–56.

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